Another Auction --Heron's Watch 7 Condos

Discussion in 'Real Estate' started by SHELLY, Apr 21, 2007.

  1. Smiling JOe

    Smiling JOe SoWal Expert

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    So Shelly, did you predict this new high back in 1999 when the stocks took the tumble and everyone freaked out? Were you buying out the people who were selling? That recovery seems fairly strong. Wonder if the same could be in store for the real estate market???

    Of course the flip side to the Dow, the Nasdaq, has yet to see that strong recovery with new highs.
     
  2. SHELLY

    SHELLY SoWal Insider

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    Actually, I didn't get into the "Dot.com Frenzy, the "Tech Wreck" or the "Averaging Down Hype" that followed...nor was I into Beanie Babies or Pre-construction Condos. I am risk averse by nature (except during an occassional jaunt to Vegas) and therefore fascinated by the folks who, damning fundamentals, throw caution to the wind and chase the next big investment du jour. I'm guessing next up will be Private Equity.

    Real estate markets, by nature, take a heck of a lot longer to trudge through their cylce (from peak, to trough, to peak) than just one or two "off" years. Having said that, from what I've read, the NAR stated that 2006 was the Third Highest Sales Year on Record! And they're saying that 2007 is shaping up to be the 4th Highest...so apparently, regardless of the news about the excessive inventory supply and stubborn buyers and sellers, RE is doing pretty damn good--no? So I imagine it hasn't troughed yet.

    By the way, NASDAQ topped at 5048 in March 2000....a little over 7 years later (even after the last "bull market years") it is still down 97%. I have an acquaintence who JUST THIS YEAR sold off a bunch of NAS-JUNK he'd been holding since 1999. :roll:

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  3. Smiling JOe

    Smiling JOe SoWal Expert

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    By this statement, you are saying that it is down to 151 from the high at 5048. Is that really what you mean?
     
  4. SHELLY

    SHELLY SoWal Insider

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    WHOA! :eek: Flashback to my days at Arthur Anderson!

    :cool: (needs a 97% boost)

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    Last edited: Apr 26, 2007
  5. 00seer00

    00seer00 Beach Lover

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    Re: Having a Auction ( Results )
    The 120 Acres sold Absolute at 2,500 per acre +10% buyer fee= 2,750 per acre.

    We did not get a reasonable offer on the rest. That is a great buy for the buyer, it was at the very bottom of the range of what we thought it might sell for. If there are any buyers for the rest, let me know. We will be listing the property later next week.
     
  6. Pirate

    Pirate Beach Fanatic

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    How would a loan create a better investment in a flat market? Leverage eats up cash flow.
     
  7. Smiling JOe

    Smiling JOe SoWal Expert

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    Litter on the "Scenic Highway"

    Opposite side of this sign are two used cars for sale. This sign appears to be located on the edge of the right of way and State Forest. I've seen a couple of more around town. I know these people want to sell their condos, and I see other signs of all sorts illegally placed along the right of way, posted by others who want to sell their things too. It seems that that it is more important for people to advertise than it is to keep our area from looking like billboard row. I know that businesses get fined for sign ordinance violations, but it doesn't seem to also apply to these roadside signs which are not placed on the owner's property. I can understand these people maybe putting the signs out on auction day, so that any attendees will know the location, but I would hope that anyone planning to buy at the auction would know where the property is located. Let's try to have a little more respect for area.
     
  8. SHELLY

    SHELLY SoWal Insider

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    FLORIDA STATE WILD FLOWERS :D

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    Last edited: Apr 30, 2007
  9. Searcher

    Searcher Beach Comber

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    The short answer is that it depends on what you buy.

    Say you and I each have $100,000 to invest. You buy a single property and pay $100,000 cash. I buy 10 identical properties and put 10% down on each. I get great terms from my lender and my note on each property is $500/month. (I know, I know - just follow me - this is for illustrative purposes only and we're ALSO going to ignore all other expenses for this illustration.)

    If these 11 properties rent for $500/month, you make $500/month and I break even (but I'm killing myself managing 10 properties).

    BUT - if they rent for $1000/month, you make $1000 and I make $5000 - so I'm starting to feel better about all my hard work. Somewhere between $500 and $1000 is a tipping point.

    I know that you asked about a flat market but markets always come back eventually and I can be patient, even at break-even, because the renters are paying the note. If the market appreciates a modest 5% over the next X-years, my equity has increased by $50,000 while yours has increased by only $5000.

    All that said, if you can afford to pay cash for resort property in SOWAL, you don't need my advice.
     
    Last edited: Apr 30, 2007
  10. Pirate

    Pirate Beach Fanatic

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    I should apologize for being sarcastic but I wasn't really asking. Leveraging like that is just asking for trouble in my opinion. What if the market slips further and renters shy away from the area? I still have 90k and the asset and you have lost 100k and might lose 10 properties. The risk factor goes up by more than the leverage percentage. If you have the million in the bank anyway why let someone else take away all of your appreciation with a loan? 5% apprciation is close to historic norms. If you don't have the cash why not buy 1 property and roll cashflow into more properties? Is there a tipping point when the market goes down? RE is cyclical and prices/rents don't always go up. 95-100 percent loans contributed greatly to the explosion in prices in the area everyone complains about. Think of how careful people would be if it was all their money going towards that investment. I prefer cash but leverage is smart at smaller percentages to make deals with fantastic returns work. I feel it shouldn't be used to make mediocre deals turn higher cash flow. A beach rental rarely falls into the first category.
     
  11. SHELLY

    SHELLY SoWal Insider

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    Searcher,

    Two things:

    (1) "Ignoring the expenses" is what is getting these folks in trouble now.
    10 Properties = 10 Insurance Policies + 10 Property Tax Bills + 10 Closings + 10 RE Commission Charges

    AND

    (2) You forgot to start your illustration with "Once Upon A Time....."


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    Last edited: Apr 30, 2007
  12. Bob

    Bob SoWal Insider

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    Yes, in Florida the real estate commision is a charge to the buyer at closing. In addition, the buyer always pays the closing fee, and taxes are never pro-rated, right Shelly?
     
  13. SHELLY

    SHELLY SoWal Insider

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    Depends if you're talking about 2005 or 2007.


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  14. Searcher

    Searcher Beach Comber

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    I'm not trying to defend stupid speculation on beach RE. As I said in my earlier post IT DEPENDS. Sometimes leverage can work to to one's advantage. Cash purchase will usually work just fine but it is not the only way to make(or loose) money.
     
    Last edited: May 1, 2007
  15. Searcher

    Searcher Beach Comber

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    As always - thank you Shelly.

    1 - Remember rule #1 "Crunch Thy Numbers"

    2 - Amen - it is much harder now ...but not impossible.
     
  16. egrp

    egrp Beach Lover

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    If a piece of real estate will not cash flow with 80% loan, then it isn't an investment.

    Everything cash flows when you pay cash...but your returns suck.
     
  17. Smiling JOe

    Smiling JOe SoWal Expert

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    I would be so sure about that. You must consider mgt fees, taxes and insurance, which could leave you at break even or negative cash flow, depending on the property.
     
  18. Pirate

    Pirate Beach Fanatic

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    To each his own. A loan definitely takes a sizeable chunk of your return. I only buy deals that make sense to me with little risk. My returns do not suck I assure you and no matter what the market does I will be fine. It is a risk versus reward game to be sure. If you had bought those 10 properties a couple years ago I assume you wouldn't be so agressive. I don't feel like risking 100 percent of an investment to make a higher return. If you do then I wish you luck and prosperity in your gamble.
     
  19. jimmyp5

    jimmyp5 Beach Lover

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    Thank you, Joe. Why do so many people insist on making this place just as trashy as so much of the rest of this country?
     
  20. egrp

    egrp Beach Lover

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    its not about gambling...its about opportunity cost and diversification.

    I would submit its more risky to own 1 property vs. 10 and its also more risky to have 100% equity in an investment than 10%, but you are rite to each his own. seems like your strategy has worked for u in the past and i hope it continues to do so.
     

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